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Most OECD countries spend substantially more on maternity leave
schemes than on early childcare. However, given high tax burdens and rapidly aging
populations, female labor force participation is critically needed. Moreover, it is important
to know whether the main beneficiaries, the children themselves, reap more benefits from one
or the other in the long term. The first cohorts exposed to the introduction or extension of
maternity/paternity leave schemes and subsidized childcare programs have now completed
education and entered the labor market, allowing an investigation of these programs’ long-term
economic effects.

Relative costs and family characteristics
determine the effectiveness of different forms of childcare

Increasing population age and low fertility
rates, which characterize most modern societies, compromise the balance
between people who can participate in the labor market and people who need
care. This is a demographic and social issue that is likely to grow in
importance for future generations. It is therefore crucial to understand
what factors can positively influence fertility decisions. Policies related
to the availability and costs of different kinds of childcare (e.g. formal
care, grandparents, childminders) should be considered and promoted after an
evaluation of their effects on the probability of women having children.

If ignored, the motherhood wage penalty may
threaten the effectiveness of policies targeting fertility

The motherhood wage penalty denotes the
difference in wages between mothers and women without children that is not
explained by differences in human capital characteristics and labor market
experience. As part of the gender pay gap, the motherhood wage penalty can
represent a significant cost to being female and having children. If
ignored, it may undermine policy initiatives aiming to increase fertility
rates in post-socialist countries, such as the costly “baby bonus,” which is
a government payment to new parents to assist with the costs of
childrearing.

Childcare provided by grandparents helps young working mothers,
but reduces the labor supply of older women

Older people in developed countries are living longer and
healthier lives. A prolonged and healthy mature period of life is often associated with
continued and active participation in the labor market. At the same time, active grandparents
can offer their working offspring a free, flexible, and reliable source of childcare. However,
while grandparent-provided childcare helps young parents (especially young mothers) overcome
the negative effects of child rearing on their labor market participation, it can sometimes
conflict with the objective of providing additional income through employment for older
workers, most notably older women.

A range of other policies and changes are needed
for childcare expansion to increase mothers’ labor supply

In 2002, the EU set targets for expanding
childcare coverage, but most of the post-socialist countries are behind
schedule. While childcare expansion places a heavy financial burden on
governments, low participation in the labor force by mothers, especially
those with children under the age of three, implies a high potential impact.
However, the effectiveness of childcare expansion may be limited by some
common characteristics of these countries: family policies that do not
support women’s labor market re-entry, few flexible work opportunities, and
cultural norms about family and gender roles shaped by the institutional and
economic legacy of socialism.

The success of universal preschool education depends crucially
on the policy parameters and specific country context

Since the 1970s, many countries have established free or highly
subsidized education for all preschool children in the hope of improving children’s learning
and socio-economic life chances and encouraging mothers to join the labor force. Evaluations
reveal that these policies can increase maternal employment in the short term and may continue
to do so even after the child is no longer in preschool by enabling mothers to gain more job
skills and increase their attachment to the labor force. However, their effectiveness depends
on the policy design, the country context, and the characteristics of mothers of
preschoolers.